Tuesday, September 22, 2015

Finance: Munich Re Details Multiple Geothermal Well Risk Insurance

Electricity from the depths of Africa (Topics Magazine)

Conditions around the East African Rift Valley are ideal for using geothermal energy. Munich Re has developed a new policy to cover the exploration risk and to help ensure that sufficient investors can be found for such sustainable power generation projects.

For the Akiira project in Kenya, Munich Re has implemented a new coverage concept with its Multiple Well Risk Insurance: unlike the case in low-enthalpy regions, such as Germany, the projects comprise a portfolio of several production and injection wells instead of a doublet with just two wells.

The minimum energy yield of a complete portfolio of wells is consequently insured in several project phases. Parameters for each phase are agreed between Munich Re and the project; these determine whether the project is to be aborted as being unsuccessful, thus triggering an insurance payment – or whether the promising results achieved merit continuation to the next phase.

The process involves a close exchange of information and alignment of interests between Munich Re and the project. An advantageous concept for both sides: balancing the higher risk at the beginning against the lower risk in later phases makes the project insurable and provides investors with comprehensive security for the entire project term. The option of an early exit in the event of failure also serves the interests of both parties, as it limits the investors’ risk of financial loss.

Read More.......